In a September 15, 2022 speech, Deputy Attorney General Lisa Monaco announced new Department of Justice guidelines for prosecutors to use when assessing corporate criminality. Although the new guidelines address several issues, the primary focus of the guidelines is on individual accountability. Monaco emphasized at the outset of her speech that “the Department’s number one priority is individual accountability.” The new guidelines represent a clear signal of the Department’s renewed focus on corporate criminality enforcement. The text of Monaco’s speech can be found here, and the September 15, 2022 DOJ memo outlining the new guidelines can be found here.
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Executive Compensation
Nissan Chairman’s Arrest and Pay Disclosure Leads to U.S. Securities Suit
The high-profile November 18, 2018 arrest in Japan of Carlos Ghosn, the Chairman and former CEO of Nissan (and of several other car companies) on charges of misleading the Japanese government and investors about his compensation made the front pages of the world’s papers. Continuing revelations, including the recent indictment of Ghosn and other company executive, continue to roil the company. On December 11, 2018, an institutional investor and holder of U.S.-traded Nissan ADR’s initiated a securities class action lawsuit against the company. The lawsuit is interesting in and of itself but also with respect to how it reflects several recent securities litigation filing trends.
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U.K. Government Announces Corporate Governance Reform Proposals
In the great pendulum swing that characterizes the mood toward government oversight of companies and corporate governance, the pendulum in the U.S. has swung against regulation and against mandated governance requirements. However, in the U.K., the pendulum is on the opposite end of the arc, as the current government is moving quickly to adopt new corporate governance requirements.
As discussed in an earlier post (here), the current U.K. governance initiative kicked off with the Prime Minister’s November 2016 Corporate Governance Reform Green Paper, which focused on executive pay, private companies, and workers on boards. The Green Paper solicited comments on its various proposals. The comments have been received and processed and the result is an August 2017 report entitled “Corporate Governance Reform, The Government Response to the Green Paper Consultation” (here). The report sets out a list of governance reform proposals the government intends to put into effect in the coming year.
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Carrot and Stick: Incentive Compensation and Compensation Clawbacks
One of the recurrent governance proposals to remedy corporate excesses has been the idea of clawing back the compensation paid to company officials who presided over corporate scandals. Both the Sarbanes Oxley Act and the Dodd-Frank Act included provisions mandating compensation clawbacks for corporate executives at companies that restate their financial statements. As Columbia Law School Professor John Coffee details in his November 21, 2016 CLS Blue Sky Blog article entitled “Clawbacks in the Age of Trump” (here), despite these statutory revisions, the use of “extreme incentive compensation” continues to motivate corporate behavior. In order to counter-balance the impact of incentive compensation, Coffee suggests that companies should adopt their own compensation clawback requirements that apply more broadly than the statutory clawback provisions.
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Guest Post: Ninth Circuit Clarifies What Might Trigger SOX 304 Disgorgement
Among the many issues arising under the Sarbanes-Oxley Act are questions surrounding disgorgement under Section 304, particularly questions concerning what actions and whose actions might trigger disgorgement. In the following guest post, Bruce Ericson of the Pillsbury Winthrop Shaw Pittman law firm takes a look at the Ninth Circuit’s August 31, 2016 decision in U.S. Securities & Exchange Commission v. Jensen in which the appellate court held that the SEC can seek disgorgement from a company’s CEO or CFO even if the triggering restatement did not result from those corporate officers’ misconduct. I would like to thank Bruce for his willingness to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Bruce’s guest post.
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Controversy Surrounds SEC’s New Proposed Dodd-Frank Executive Compensation Clawback Rules
On July 1, 2015, a divided SEC voted 3-2 to propose rules directing the securities exchanges to adopt standards requiring listed companies to adopt policies requiring the companies’ executive officers to pay back incentive-based compensation in the event the company restates its financials for the year in which the compensation was awarded. The proposed rules,…
Executive Compensation: Do Clawbacks Lead to Certain Types of Earnings Manipulation?
When Congress enacted stiff executive compensation clawbacks as part of the Dodd-Frank Act, the assumption was that the adoption of these kinds of measures would reduce the number of corporate restatements and increase investor confidence in financial reports. However, a new study focused on companies that have adopted clawback measures suggests that these gains may …
Are We Done With Executive Compensation Proxy Disclosure Litigation?
The onslaught of litigation filed after the advent three years ago of the Dodd-Frank “say on pay” requirements may finally be winding down. According to a June 23, 2014 memorandum from the Pillsbury law firm entitled “Is Proxy Disclosure Shareholder Litigation on Executive Compensation Finally Over?” (here), the litigation came in three distinctive …
Executive Compensation and Populist Discontent
Over the weekend, voters in Switzerland rejected by a roughly two-to-one margin a referendum that would have restricted executive salaries at Swiss companies to twelve times that of the company’s lowest paid employee. The vote outcome is interesting because it follows so closely on the heels of a ballot initiative earlier this year in which…
Enough Said Yet?: Say on Pay Litigation May Have Had Its Day
As I have noted in prior posts (most recently here), plaintiffs’ lawyers have rushed to file “say on pay” lawsuits, either after a negative advisory shareholder vote on executive compensation, or more recently before the vote occurs based on alleged deficiencies in the proxy materials related to the vote. In the latest in a lengthening…